An interesting thread.
Jeema, in the interest of full disclosure, I should first mention that I am a AdWords employee - for the past 6 or so years. So please take my opinion for what you feel it's worth. ;)
Over the years I have seen a great many advertisers use AdWords with great success. On the other hand, I have also seen a great many advertisers fail miserably.
Then there are those who sort of keep on keeping on, without ever really being sure if they are succeeding or not.
What's the difference between one and the other?
If I had to summarize in a simplified way, it would be like so:
* Advertisers who expect to very quickly set up their account and then forget about it - and who do not have either the time or interest to really learn how AdWords works - will almost certainly be disappointed with their success and with the AdWords program itself.
* Advertisers who make only a moderate effort will likely see a moderate success rate at best.
* Advertisers who take advertising with AdWords very seriously, who spend a substantial amount of time learning the nuances of how it works, and who spend a lot of time managing their account, experimenting, learning from the results of those experiments and then updating their account, tracking their Return on Investment (ROI) using the free tools available from AdWords, etc can find AdWords to be a very effective way to affordably send highly qualified potential customers to their site - and make a healthy profit doing it.
In my opinion, a realatively concise overview of how to think about AdWords, and how set up an AdWords account for success may be found on the page below. It's one of my favorite pages in AdWords Help Center:
Tips for success
The topics covered on this page - which are essential to using AdWords effectively in my opinion:
1. Identify your advertising goals.
2. Organize your account for maximum effectiveness.
3. Choose relevant keywords and placements.
4. Create straightforward, targeted ads.
5. Optimize your website for conversions.
6. Track your account performance.
7. Test and modify your campaigns to get the results you want.
Just my $0.02. ;)